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ACOs: A Survival Option for Independent Practices Focus Paper Ann M Roemen, MBA, FACMPE August 13, 2018 This paper is being submitted in partial fulfillment of the requirements of Fellowship in the American College of Medical Practice Executives

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Page 1: ACOs: A Survival Option for Independent Practices papers...ACOs: A Survival Option for Independent Practices 1 Value based reimbursement is the future. It is part of the healthcare

ACOs: A Survival Option for Independent Practices

Focus Paper

Ann M Roemen, MBA, FACMPE

August 13, 2018

This paper is being submitted in partial fulfillment of the requirements of Fellowship in the

American College of Medical Practice Executives

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Value based reimbursement is the future. It is part of the healthcare landscape now, but only to a

limited degree. In the not too distant future, fee for service will be limited and value-based reimbursement

will be the payment methodology for most healthcare services.

The federal government is leading the way in developing innovative models to test value-based

reimbursement. Medicare has established an aggressive schedule to move 90% of payments from fee for

service to value-based payments and 50% of fee for service payments to alternative payment models by

2018.

Medicare unveiled its first Accountable Care Organization (ACO) model, the Medicare Shared

Savings Program (MSSP), in 2012. Since that time, there have been a number of other ACOs introduced.

All are focused on improving care, saving money and sharing in that saved money. Some are risk-free and

some share risk. Some are disease specific and some receive advance payment from the federal

government to aid in set-up.

While accountable care organizations will be weaved into the fabric of the future of healthcare in

the United States, participating in ACOs is not a possibility for practices which do not have a minimum of

5,000 Medicare beneficiaries. That number was established, by Medicare, as a base, for practices to be

considered for participation.

Historically, fraud and abuse laws prohibited independent practices from working together to

achieve the goals of the ACO. Coordinating care, sharing cost data and referring patients to each other to

attain savings was illegal. When it was determined that this large pool of providers would never be able to

participate, the Secretary of Health and Human Services (HHS) removed a major barrier to entry. The

Anti-kickback, Stark, and Civil Monetary Penalty laws were waived as necessity for independent

practices to participate in ACOs.

Introduction

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The future of healthcare reimbursement is based on payment for quality. Accountable Care

Organizations (ACOs) offer an opportunity for medical practices to gain experience in value-based

reimbursement, and in some cases, in a non-risk bearing format. They also serve as a platform for

physicians to enhance the quality of care, reduce costs and improve health outcomes.

Coordinating care is a central tenet of an ACO. It is intended to help ensure that patients,

especially the chronically ill and most vulnerable, get the right care at the right time, with the goal of

avoiding unnecessary duplication of services and preventing medical errors. (Innovation Center ACO

Models, n.d.)

Operating an independent physician practice is difficult. Healthcare regulations have become

more complex increasing overhead costs and challenging the viability of the practice. As physicians

contemplate their role in the new world of healthcare where fee for service will be no more, or at least

greatly reduced, the thought of compliance, quality reporting and mere survival are exhausting and

overwhelming.

As administrative requirements have become overly burdensome, the employed model has

become increasingly more attractive, especially to the solo practitioner and those practicing in small

practices. The trajectory toward employment is staggering. In 2012, 53.2% of physicians were practice

owners. In 2014, that number was 50.8%. In 2016 it was 47.1%. (AMA 2017 Physician Practice

Benchmark Survey)

Aside from joining a larger group, options for small practices to stay independent have largely

been limited. Clinical Integration is one option, but is very difficult to achieve. It allows otherwise

unrelated groups, sometimes in the form of an Independent Physician Association (IPA) or Physician

Hospital Organization (PHO) to collectively negotiate payer contracts. Practices choosing the clinical

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integration path must prove that achieving quality goals is only possible with the ability to collectively

contract with payers. Due to federal fraud and abuse regulations, including Stark and the Anti-Kickback

Statute (AKS), such organizations face intense scrutiny by the Federal Trade Commission (FTC) which

makes the determination as to whether or not the entity is sufficiently integrated, financially or clinically.

Groups face severe financial penalties – and even closure should the FTC determine they do not meet the

integration requirements. These same laws also prohibited independent practices from collaborating in

model programs for shared savings.

The Centers for Medicare and Medicaid Services (CMS) recognized that these laws were a barrier

to independent practices becoming involved in innovative cost-saving models programs. In collaboration

with the Office of Inspector General (OIG), the FTC, and the Secretary of Health and Human Services

(HHS), waivers of these laws were granted as an incentive to engage and encourage independent practices

and facilities to work together. These waivers allow independent groups, with no legal or financial ties, to

develop innovative approaches to improving care and reducing the cost of care, without fear of

prosecution for violating the law. These waivers give broad discretion to groups in developing initiatives

and incentivizing desired changes in behavior. With built-in requirements for quality improvement and

cost savings, clinical integration is obtained when a medical practice joins an ACO.

Purpose

The purpose of this paper is to take an in-depth look at ACOs, in particular, MSSPs and how they

can be used as a mechanism for independent practices to achieve the Institutes of Health triple aim of

reducing costs, improving quality, engaging patients in their care, and at the same time, making

independent practice more sustainable.

Background

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Accountable care organizations (ACOs) are groups of healthcare providers who have agreed to be

held accountable for the cost and quality of care for a group of beneficiaries. The goals of an ACO are in

line with the Institute for Healthcare Improvement’s (IHI) triple aim of improving the patient experience

of care (including quality and satisfaction); improving the health of populations; and reducing the per

capita cost of health care. (Institute of Health, n.d.)

Medicare ACOs serve more than 10.5 million beneficiaries with hundreds more commercial and

Medicaid ACOs serving millions of additional patients. (National Association of ACOs, n.d.) Physicians

in general have operated in a fee for service environment, but this model is rapidly changing, on the federal

level with Medicare, on the state level with Medicaid and with commercial payers as well.

CMS has a number of model programs, but the Medicare Shared Savings Program (MSSP) is the

largest and is the program on which this paper will focus. The MSSP was derived from the Physician

Group Demonstration Project, which started during the George W. Bush administration, and the MSSP

was permanently authorized by the Patient Protection and Affordable Care Act (PPACA) of 2010 and

signed into law by then President Barack Obama. The MSSP began in 2012 with two participation

options, Track 1 and 2. MSSP Track 3 was added in 2016 and Track 1+, was added in 2018.

As shown in Table one, MSSP track 1 has no downside risk. It has the most appeal, as it allows

groups to gain experience in a quality based program with no risk of financial penalty. When saving and

quality targets are met, track 1 ACOs share savings with Medicare. If targets are not met, there are no

penalties. ACOs are limited to two – three year agreement periods in track 1. After a maximum of six years,

track 1 ACOs must move to a risk bearing MSSP.

Tracks 1+, 2 and 3 all require certain levels of downside risk but have other benefits such as the

opportunity to share in greater amounts of savings generated by the ACO. There is also the option for

additional waivers from certain Medicare rules.

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Table 1 - Shared Savings Program ACO Participation Options

The Shared Savings Program offers different participation options (tracks) that allow ACOs to assume various levels of risk.

Track Financial Risk Arrangement

Description

1 One-sided Track 1 ACOs do not assume downside risk (shared losses) if they do not lower growth in Medicare expenditures.

Medicare ACO Track 1+ Model*

Two-sided Medicare ACO Track 1+ Model (Track 1+ Model) ACOs assume limited downside risk (less than Track 2 or Track 3).

2 Two-sided Track 2 ACOs may share in savings or repay Medicare losses depending on performance. Track 2 ACOs may share in a greater portion of savings than Track 1 ACOs.

3 Two-sided

Track 3 ACOs may share in savings or repay Medicare losses depending on performance. Track 3 ACOs take on the greatest amount of risk, but may share in the greatest portion of savings if successful.

*The Track 1+ Model is a time-limited CMS Innovation Center model. An ACO must concurrently participate in Track 1 of the Shared Savings Program in order to be eligible to participate in the Track 1+ Model.

In 2015, then secretary of Health and Human Services (HHS), Sylvia Burwell announced that her

agency would begin focusing its energy on incentives, as shown in Figure one, to move to higher value

care. More specifically she stated that the agency’s goal was to have 85% of all Medicare fee-for-service

(FFS) payments tied to quality or value by 2016 and 90% by 2018. An additional goal was to have 50%

of payments tied to alternative payment models (APMS), such as ACOs, by the end of 2018. (Japsen,

2015)

Figure 1

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By early March of 2016, Medicare estimated that it had already hit its first target, 11 months

ahead of schedule. This milestone was hit in part by 121 new ACOs joining the Medicare program that

year.

Current Status

In 2018, there were 480 MSSP ACOs, 17% more than 2017. Of those, 101 were in risk-bearing

ACOs, compared to 42 in 2017, an increase of 140%. Part of the draw to the risk-based ACOs is that, in

its move to the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, CMS designated

Tracks 1+, 2 and 3 as Advanced Alternative Payment Models (APM) which makes them eligible to

receive automatic 5% annual lumps sum increases to Medicare physician payments 2019 - 2024. While

the financial incentive is desirable, it is a financial gamble of earning 5% and taking on the risk of having

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to pay back losses if they are incurred. In addition, once an ACO becomes risk bearing, it cannot move

back to Track 1.

A medical practice needs to evaluate the potential risks and rewards. If the risk of having to pay

back losses is too much to take on, it might be advisable to take the time to gain experience in a non-risk

bearing track one ACO.

While track one ACOs are not advanced APMs, they are recognized as advanced Merit-Based

Incentive Payment System (MIPS) organizations and as such, they receive preferential treatment in the

scoring process of MIPS quality reporting.

Because physician-led ACOs are more flexible, providers can not only stay independent but

maintain control over their mix of payers and the payment models they choose to support. These ACOs

can also include more than just independent physicians. They can include hospital and employed

physicians, with the leadership of the ACO controlled by the physicians.

This approach is only gaining momentum, as the majority of physicians say they would prefer to

stay in private practice and not sell to a larger entity. Providers are seeing that these programs are

positioning them to better meet the changing expectations of patients. (Giannulli, 2016)

Large healthcare systems do participate to a limited degree in MSSP ACOs. However, one of the

key components of an ACO is to reduce costs, which includes reducing hospital utilization, one of the

most costly locations for care. Large healthcare systems rely on admissions, or “heads in beds”, for a

large portion of their revenue stream, thus have limited incentive to reduce hospital utilization. Indeed,

those which own Critical Access Hospitals (CAH) are further incentivized to place patients in swing beds

in these facilities for skilled nursing services, as they are very profitable.

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Unlike hospital-employed groups, independent primary care groups can work to reduce health

care costs without the conflicting incentives to fill hospital beds and keep specialist practices busy and

incomes high. (Casalino, et al., 2016)

As shown in Table two, Physician-led ACOs have proven success. 2016 MSSP performance

results, shared by CMS, showed that 45% of physician-owned ACOs were successful in achieving

savings, as compared to 23% of ACOs that include a hospital.

Table 2

Considerations for Joining

Not only is the federal government’s aggressive timeline for moving from fee-for-service

payment to value based reimbursement, reason for physician practices to get on board, commercial payers

are and will continue to follow suit. UnitedHealth one of the largest health insurance payers in the

industry, announced in 2015 that it was committed to increasing payments that are tied to value-based

arrangements to $65 billion by the end of 2018. (Japsen, 2015) This type of reimbursement is on the fast-

track to becoming the norm.

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While reimbursement is the primary driving force behind the ACO movement, so too is

improving the quality of care for patients via coordination of care, disease management, care protocols

and a reduction in unnecessary services. Physicians have forged relationships with their patients and are

in a position to influence patient behavior, resulting in improved outcomes and potential financial savings.

In order to be approved by CMS, an entity forming an ACO must have at least 5,000 fee-for-

service Medicare beneficiaries who can be attributed to the primary care physicians comprising the ACO.

Beneficiaries in a commercial or Medicare Advantage plan are excluded from attribution, also known as

assignment.

Patient attribution is determined in two steps. Step one is based on a plurality of visits with

primary care physicians, defined as Family Medicine, Internal Medicine, General Practice, Geriatric

Medicine or Pediatric Medicine. In 2018, advance practice practitioners were added to the list of primary

care providers. These individuals, nurse practitioners and physician assistants, may have beneficiaries

assigned to them, but there is a requirement that they see a primary care physician at least one time each

year.

Step two of assignment includes nineteen additional specialties, again, looking at plurality of

visits greater than those of a primary care physician, including cardiology and endocrinology. There are

also twenty-five specialties excluded from assignment. Primary care physicians are limited to joining one

ACO. Specialists are allowed to join as many ACOs as they wish. Assignment is important to achieve the

number of lives CMS requires to be an ACO. Adding specialist physicians is a way to engage others in

the development of quality initiatives and control costs.

While one physician out of three identifies as independent, in 2016, 38% of physicians in the

United States were still working in practices comprising five or fewer physicians. (Natacha Lemaire,

2018) Small independent practices, by themselves, may not have the required minimum number of

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beneficiaries, so partnering with other groups or hospitals to get the number of required beneficiaries

makes participation feasible. Partnering with others to form an ACO is a good option for those practices

wishing to remain independent.

Capital to develop the ACO infrastructure is another consideration. Coordinating care will

require investments in technology and data analytics. It may also require hiring case managers or nurse

navigators to advance the initiative of care coordination. If multiple EHR (Electronic Health Record)

platforms are used, a substantial amount of money may be needed to achieve interoperability.

Some physician-only ACOs have been able to obtain management information technology

software, and to build care coordination and compliance infrastructure from third-party vendors willing to

accept a contingency payment based on potential savings. (Robeznieks, 2018). These groups enter into

agreements to share future savings with the vendor. Such an arrangement can remove a significant

obstacle to ACO success. Private equity firms and payers are another option to reducing the outlay of

capital to purchase extensive software solutions.

When choosing partners in the ACO, physicians should take into consideration the characteristics

of these partners that are of value to them. These choices aren’t just about meeting the basic requirements

for CMS approval, but how these choices will impact ACO’s ability to achieve its goals of reducing cost,

improving the quality of care and engaging patients in their own care.

Physicians might want to start by developing a checklist of priorities as it pertains to who would

be ideal partners in the ACO. Considerations might be independent physicians who are like-minded,

forward thinking, self-motivated, respected in the community and thought of as a leader. Composition is

not only important to achieve the required number of beneficiaries, but also to better manage the total cost

of care wherever care is provided. Primary care physicians are required, but specialists should also be

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considered as they can also be critical to cost-savings. Hospitals, health systems, skilled nursing facilities,

home health agencies and equipment suppliers could also play an important role.

Including other healthcare entities in the ACO will allow for greater levels of care coordination

and collaboration. When the full continuum of care is engaged, the likelihood of success is much greater.

Together the physicians can develop chronic disease management programs and hold each other

accountable.

If not already doing, ACOs can implement a robust program to generate revenue via other

services for which Medicare reimburses. These services are intended to improve the overall health of

beneficiaries, prevent chronic illnesses – or catch them early, and to help reduce overall costs by reducing

utilization. These services include annual wellness visits, chronic care management, transitional care

management and advance care planning.

Benefits of Joining

Independent practices coming together to form an ACO helps to solidify and preserve the

common goal of remaining independent. It is an alternative to joining a hospital or health system allowing

for groups to work together in ways that are not possible outside the ACO model; and it lays the

groundwork for contracting with commercial ACOs.

ACOs are not limited to working only with groups of providers in the same city, state or region.

Some ACOs work together with a multitude of other groups under the umbrella of a national ACO. As with

most business ventures, spreading out the risk over more healthcare providers lessens the individual

potential financial burden. In addition, spreading the risk over a larger pool of beneficiaries increases the

likelihood of achieving savings. Some suggest a minimum of 15,000 attributable lives for success; others

suggest 50,000, but many with much less have achieved savings. Table three, shows the performance of

MSSPs based on the size of the ACO as measured by number of assigned beneficiaries.

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Table 3

Benchmark performance by ACO size for MSSP ACOs in Performance Year 3 (2015) using 2015 PUF data   Source: NAACOS

Perhaps one of the most important benefits to an ACO is the waivers of the federal Stark Act

and the Anti-kickback Statute (AKS). These waivers allow physicians in an ACO to collaborate with

unaffiliated practices and hospitals in ways that would not have been allowed in a traditional legal

environment. These waivers allow the ACO to create incentives to change behavior and achieve the goals

of the ACO. These incentives can be designed around care coordination, reducing utilization of services,

referral relationships, providing patient transportation, aligning with ancillary providers such as home

Medicare Shared Saving Program (MSSP) Performance Year 3 (2015)  

Benchmark Performance by ACO Size   (Based on Total Assigned Beneficiaries) and number of ACOs    

ACOs with expenditures above their benchmark   (i.e., spent more than expected costs)  

ACOs with expenditures below their benchmark and did not earn shared savings (includes ACOs that spent less than their benchmark but either did not spend less than their MSR or did not meet quality reporting requirements)  

ACOs that earned shared savings   

Total Benchmark  Minus Assigned  Beneficiary  Expenditures as % of  Total Benchmark*  

<7,971 Assigned Beneficiaries  N=98  

35%   23%   42%   2.30%  

7,972 ‐ 12,545 Assigned Beneficiaries  N=98  

44%   26%   31%   1.00%  

12,546 ‐ 21,214 Assigned Beneficiaries  N=98  

57%   20%   22%   ‐0.46%  

21,215 ‐ 149,633 Assigned Beneficiaries  N=98  

57%   16%   27%   ‐0.21%  

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health and skilled nursing facilities (SNFs). The waivers allow ACOs to be creative and innovative in the

way they deliver care.

There are five waivers:

1. Pre-participation waiver

2. Participation Waiver

3. Shared savings distribution waiver

4. Physician self-referral waiver

5. Patient incentive waiver

These waivers allow for an ACO to take certain actions, if they are for the purposes of the ACO,

which would not have been allowed in a traditional legal environment such as:

Incentive payments for participating in initiatives that are used to change practice behaviors

Referrals that help the ACO achieve its goals

Incentivizing providers for participation in care coordination guidelines;

Purchasing items for other participants that will assist them in achieving the goals of the ACO

i.e. capital purchases;

Entering into financial arrangements with other entities i.e. vendors, SNFs, etc.

Sharing of data to better coordinate care

Other actions or care coordination that serves the ACO’s purposes of lowering costs or

improving quality of care.

The possibilities for initiatives, if they serve the purpose of the ACO are nearly limitless. Physicians

can be creative in developing new and better way of caring for patients, and involve entities outside of the

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medical practice who can contribute positively to the desired outcome. The ability to structure initiatives is

a significant tool to benefit primary care physicians and their patients.

For those physicians belonging to a Physician Hospital Organization (PHO) or Independent

Physician Association (IPA), the physician network may already be established and the infrastructure may

be in place that would facilitate the development of an ACO.

It is critical to keep in mind how the waivers work. Waivers require that arrangements be

“reasonably related to the purposes of the Shared Savings Program”, which include:

1. Promoting accountability for quality, cost and overall care of the Medicare population

2. Managing and coordinating care for Medicare fee-for-service beneficiaries through the ACO

3. Encouraging investment in infrastructure and redesigned care processes for high quality and

efficient service delivery (Stephen H. Siegel, 2016)

Promoting evidence-based medicine and patient engagement would be considered “reasonably

related”.

The pre-participation and participation waivers protect bona fide ACO investment, start-up,

operating, and other arrangements that carry out the goals of the Shared Savings Program. Specific

conditions must be met to be protected under the pre-participation waiver, among other things, a good faith

effort to establish an ACO within a target year.

The shared savings distribution waiver allows for the distribution and use of savings including

sharing with ACO participants and its providers and suppliers. The plan for distribution of savings must be

included in the application to CMS. CMS gives ACOs the latitude to devise a distribution plan that works

best for the ACO. It is common for ACOs to retain a portion of savings to offset start-up and administrative

costs.

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The physician self-referral waiver protects the ACO when it distributes MSSP savings to

participants, providers/ suppliers during the year in which the savings were earned; or for activities

necessary and related to the ACOs participation in the MSSP.

The patient incentive waiver is meant to increase patient engagement. There must be a

reasonable connection between the incentives and the medical care of the beneficiary. Financial incentives

are not applicable. (April Simmons, 2016) Some ACOs use this waiver to assist beneficiaries with travel to

appointments as a way to improve no-show rates, improve patient compliance and overall, improve the

health status of the patient.

In addition to the opportunity to improve healthcare, there are many benefits to independent

physicians and facilities joining together as an ACO. Through an ACO, they can legally share data,

engage in contracting with payers, take advantage of group purchasing and collectively do Medicare

Access and Chip Reauthorization Act (MACRA) reporting under the Merit-based Incentive Payment

System (MIPS).

When a practice joins an MSSP ACO, the ACO takes on the responsibility of quality reporting for

all participants. This reporting is completed by the ACO, relieving a tremendous burden from the medical

practice.

There are four components of MIPS reporting, of which the ACO reports on three; quality, clinical

practice improvement activity (CPIA), Resource Use (cost). Table four shows each category and its

corresponding weight, for both ACO participants and non-ACO participants.

Quality measures are pre-selected by CMS. See Appendix B. CMS selects beneficiaries for

each of the clinical quality measures, for which there were 17 in 2018, and sends the list, by

measure to the ACO. The ACO must report on a minimum of 248 beneficiaries per measure. This

reporting through the Group Practice Reporting Option (GPRO) begins each year in January and

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is completed in March. This benefit has the potential to limit or eliminate completely the current

quality improvement reporting to CMS that a group does on its own.

The Clinical Practice Improvement Activity (CPIA) category, in an independent practice requires

the reporting of up to four activities. Since clinical practice improvement is an inherent goal of the ACO,

ACOs receive a full score for this performance category and do not need to submit additional information

for MIPS. Full score is to the benefit of all participants in the ACO.

Resource Use (Cost) was weighted at zero for both 2017 and 2018 and is being evaluated for future

measurement.

Advancing Care Information (ACI) is the only category for which the participants (hospitals,

medical practices) are responsible. This category was formerly known as Meaningful Use. ACO

participants must report separately for this measure.

CMS evaluates an ACO as one cohesive entity and will combine the weighted scores of the

performance categories to determine a MIPS Composite Performance Score (CPS). MIPS payment

adjustments will be applied at the unique Tax Identification Number (TIN) level for each MIPS Eligible

Clinician (EC) in the ACO, with all receiving the same MIPS payment adjustment. Positive adjustments

are applied to Medicare Part B payments on a per claim basis for claims with dates of service during the

payment adjustment year.

Table 4

MIPS Performance Categories & Weights for the 2017 reporting year, affecting 2019 payment.

Performance Category  ACO Weights  Non‐ACO Weights 

Quality  50%  60% 

Clinical Practice Improvement 

Activities  

20% 

(maximum points automatically assigned) 

15% 

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Advancing Care Information   30%  25% 

Cost**  0%  0% 

 

In addition to the MIPS quality reporting measures, the ACOs quality performance, for shared

savings only, takes into account claims-based measures for readmissions and unplanned admissions as well

as patient/caregiver satisfaction as measured in a survey called Consumer Assessment of Healthcare

Providers and Systems (CAHPS). A vendor for the CAHPS survey is selected from a list of CMS approved

companies and paid for by the ACO.

In an ACO’s first year, quality reporting is measured by complete reporting. Complete reporting

means that as long as the ACO accurately reports on the minimum number of required patients, per measure,

it will receive the full score. In the second and subsequent years, most quality measures will be evaluated

on performance. Newly added measures are reporting only measures for the first two years of inclusion on

the measures list. Most will move to performance measurement after two years, but not all.

Individual practices in the ACO continue to be eligible for bonuses under MIPS. As participants in

an ACO they are also eligible for shared savings under the Medicare Shared Savings Plan. If the ACO

meets or exceeds the Minimum Savings Rate (MSR), set by CMS, it is eligible for up to 50% of the savings

based on quality performance. Physician leadership is critical in devising strategies to improve quality

scores and to reduce the cost of providing care.

The goal of the ACO is to lower the total cost of care for its attributed lives. CMS provides no

roadmap to achieving success. Rather, it relies on ACOs to be innovative and implement approaches that

would work best in one’s own market. ACOs rely heavily on data provided by CMS on a monthly basis.

These files, Claims and Claims Line Feeds (CCLF) give the ACO and physicians access to data they have

never had the opportunity to see. This data shows claims processed for all beneficiaries assigned to the

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ACO. Physicians have the ability to see where their patients are obtaining healthcare services and how

much Medicare is paying for those services. Since Medicare beneficiaries are not limited to where they can

seek care, this data gives the ACO and physicians valuable information critical to determining where the

opportunities are for achieving the goals of the ACO.

ACOs are able to drill down into the data to find expensive places of care, review length of

stay by facility type, and identify trends in utilization and cost. This data can be used to develop initiatives

to influence behavior and adjust referral patterns. With this information, physicians are empowered like

never before to engage in meaningful discussions about how to make changes that will have the most

impact. It can also be used to engage in discussions with others for whom change is desired and it can be

used to determine who the ACO might want to consider for future partners and/or participants.

Some ACOs use this data to negotiate with post-acute care providers to encourage better

management of length of stay and improve outcomes. Score cards can be developed using data from nursing

home compare, as well as claims data, to demonstrate to the facilities the criteria ACO participants will use

in determining where to send patients. The score cards can be used to determine which facilities will be

preferred locations for patients. Score cards serve as an impetus for facilities to modify behavior if they

want to continue receiving referrals from ACO participants.

This information can be used to identify areas of potential improvement. For instance, locations of

care by cost and length of stay. It can also be used to track physician participation in ACO initiatives. For

example, completion rates for annual wellness visits (AWVs), number of patients enrolled patients in

Chronic Care Management (CCM) or Transitional Care Management (TCM) or a physician’s performance

on quality measures.

In addition to monthly claims files, CMS also provides quarterly reports which include expense

and utilization for the ACO. This report includes expenditures per beneficiary assigned to the ACO in a

number of categories including hospital in-patient stay, Skilled Nursing Facilities (SNF), imaging and

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hospice. It also compares the ACO expenses to those of all other MSSP ACOs and national fee for service.

This data too can be used to identify areas of potential opportunity for improvement.

Participating in an MSSP ACO allows a medical practice to gain experience with value-based

reimbursement while it is still optional and not adopted broadly. This experience will prepare a group not

only for additional value-based arrangements with commercial payers, but for risk-based arrangements in

the future. It will also help a medical practice negotiate better commercial contracts by demonstrating ACO

success in the MSSP framework.

A physician-led ACO gives physicians the opportunity to be in lead governance roles and to be

engaged in decision making as it pertains to how they practice. Physicians can be the key drivers in

determining what activity the ACO should pursue that will have the greatest impact on patients and the

cost of care.

Another significant benefit given to participants in an ACO is automatic clinical integration.

Clinical integration, which is otherwise very difficult for independent groups to achieve, is accomplished

with participation in an ACO. It allows for groups to maintain their independence and at the same time

benefit from the economies of scale that integrated delivery systems enjoy. Clinical integration for payer

contracting can be a significant defensive move in an increasingly difficult payer marketplace.

Clinical integration would also make it possible for otherwise unrelated independent practices to

develop a separate Management Services Organization (MSO), a legal entity created to provide

management and administrative services. Among other things, the MSO, to which physicians would buy

into, could be used for group purchasing, recruitment of physicians and clinical staff, providing billing

services, and negotiating health insurance coverage for its members.

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ACOs may also be an attractive recruitment tool. The potential additional earning potential, from

shared savings, may be appealing to a recruit. They could also be used to offset the cost of a potential

income guarantee. For physicians just finishing their residency program, if the residency program

participated in an ACO, the practice would simultaneously benefit from the experience of the individual’s

experience in value-based care.

If the practice joins with other groups to form the ACO, the added numbers of physicians and other

providers offer potential stability in the ever-changing medical practice world. The collaboration with other

independent groups offers the opportunity to share expenses, negotiate group discounts and the ability to

set up other ventures to create additional revenue streams.

Barriers to Entry

Panel size for independent practices can be a challenge. To qualify for participation in a Medicare

ACO, there is a requirement of a minimum of 5,000 assigned beneficiaries. This requirement alone could

prevent a practice from participating on its own. As practices become more consolidated, independent

primary care physicians can be particularly hard to find. Utilizing the participation waivers of Stark and

the Anti-Kickback Statute (AKS) and joining forces with others makes this number more attainable.

Independent physician practices should not limit their participant selection only to their city, state

or region. The waivers offer the opportunity to collaborate with others. There is not a geographic

limitation to this. There are opportunities through professional associations and organized national ACO

groups.

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For some, joining an ACO might be seen as a threat to their autonomy. An ACO would need to

critically evaluate whether practice is a fit for the ACO. Without the engagement and commitment of all

physicians, attaining the goals of the ACO will be limited or perhaps impossible.

ACOs are associated with considerable start-up costs. Tom Scully, former CMS Administrator,

estimates startup costs to be at least $30 million in a midsized market.17 The estimated cost of starting

and operating a physician ACO in the first year was more than the CMS estimate of $1.8 million (Erwin

A. Blackstone, 2016)

As shown in Table five, based on a survey of membership the National Association of ACOs

(NAACOS) found that the cost varied considerably between single ACOs and multi-ACOs with

centralized operations across many ACOs.

Table 5

Estimated ACO costs for participating in the MSSP, by all survey responses and ACO type:  

  

Clinical and care management   

Health care information technology, population analytics, and reporting  

ACO management,  administration, financial, legal, and compliance  

Other (sum or all other operating costs)   TOTAL  

Type: Single ACOs   $772,020   $563,403   $479,781   $143,070   $1,943,276  

Type: Multi‐ACOs  (centralized operations across many ACOs)  

$350,456   $351,305   $221,773   $80,656   $974,289  

Averages of all survey responses  

$642,044   $501,300   $402,272   $121,115   $1,622,032  

There are opportunities to work with others to help fund the start-up of an ACO. Some work with

venture capitalists, vendors, payers or ACO management companies, often making arrangements for

contingency payments based on future savings. This is a financial risk for any entity looking to invest in an

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ACO, and independent physicians may again consider the obligations to another entity a threat to their

autonomy.

In addition to inpatient care, one of the most expensive places of care is post discharge facilities, in

particular skilled nursing facilities. A challenge to managing this cost is the limited involvement of primary

care physicians in the discharge process. With the rise of the use of hospitalists fewer primary care

physicians hold hospital privileges, leaving recommendations and decisions regarding discharge disposition

to those in the hospital – some of which may have a financial incentive to send patients to their own

facilities. This can make it very difficult to control costs when the hospital and skilled nursing facilities are

not participants or at least engaged in some way with the ACO.

Coding is critical to how CMS establishes the benchmark for the ACO. Benchmarks are based on

historical expenditures of the ACOs assigned beneficiaries. They also take into account the illness severity

of these patients, as reflected in hierarchical condition categories (HCCs). HCCs are based on physician

use of diagnosis codes. If a practice has not been actively coding all of the pertinent diagnosis codes for

each patient annually, Medicare will not have an accurate representation as to the illness acuity of the ACOs

assigned beneficiaries. This will result in a benchmark that would likely be lower than what it should be,

making achieving savings either difficult or impossible. Including a medical practice not well versed in

risk-based coding, could have a negative impact on an ACOs financial success.

Potential Risks

One potential risk to a physician or group considering joining an ACO is that the quality reporting

of all participants is aggregated for calculation under MIPS. Thus, if a primary care group which does a

poor job in quality performance, joins an ACO, the MIPS score will reflect, in aggregate the performance

of each individual practice. A lower performing participant has the potential to decrease fee for service

payments, from Medicare, for a better reporting practice.

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One of the potential drawbacks to forming an ACO with other independent practices is that

quality outcomes are measured in aggregate, so if one entity is more advanced than another, their quality

score could be negatively impacted by those groups which are not as experienced, or have less favorable

outcomes. In addition, due to the independent nature of these practices, it can also more challenging to

reach agreement on care protocols, and to enforce compliance.

At this time, CMS has a limit as to the amount of time an ACO can remain in a non-risk bearing

model. If an ACO determines, after the allotted six years, that it is not ready to take on risk, it may have to

disband or create a new ACO consisting of a substantially different make-up of providers, which may prove

difficult at best. If the ACO disbands, all of the waivers, that were potentially used to form collaborations

and help achieve the goals of the ACO of improving care and reducing costs, will also go away.

Conclusion – The Future

ACOs are in their infancy and continue to evolve. One of the biggest issues facing CMS is how to

incentivize more clinicians to move to a risk-based model. At the end of 2018, 81 track one ACOs will be

completing their sixth and final year in this model. While taking on risk is the ultimate goal, the question

remains of how much experience in a track one model is needed before a group is comfortable taking on

risk.

ACOs that started in the Medicare Shared Savings Program (MSSP) Track 1 in either 2012 or 2013,

by law are supposed to move to risk in 2019. NAACOS surveyed 82 ACOs that began in those years and

71% of them said they are likely to leave the program if they must assume risk. Lobbying efforts have been

underway to convince CMS that these non-risk ACOs should get another three-year performance period to

help them better prepare for taking on risk. The majority of those surveyed by NAACOS, 76%, said they

would remain in the program if CMS granted that request. (Dickson, 2018)

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While risk-based models provide for a greater share in savings, performance results of these models

demonstrate that the economics of it are impractical especially for groups which do not have the financial

resources to survive should losses occur.

The Medicare Payment Advisory Commission (MedPAC) in its June 2018 report to congress stated

that two-sided risk models best meet the commission’s principles because they encourage clinicians to be

responsible for the quality and cost of care for beneficiaries. (HOW to list source).

MedPAC points out issues with current models, including the use of the CMS established

benchmark as the measurement of financial performance. The benchmark was designed to be equitable

across the country while costs and utilization are highly variable depending on where a beneficiary resides.

This variation has resulted in shared savings for those areas which have had high use and cost and little or

no savings for those located in areas of the country that are already efficient.

Critical to the success of ACOs formed by otherwise unrelated entities is the waiver of Stark and

AKS. As recent as June of 2018, CMS released a Request for Information (RFI) on possible regulatory

changes to Stark. They were seeking input from the healthcare industry on how to further reduce regulatory

burdens and dismantle barriers to value-based care transformation. CMS is concerned that the Stark Law

may have a negative effect APMs and other value-based arrangements. (Wallfisch, 2018) Further revisions

to the Stark Law may give ACOs more flexibility in creating innovative approaches to achieving the triple

aim and perhaps make it even more attractive to independent physician practices.

A long-term issue for ACOs, is whether or not hospitals are a viable participant in ACOs. They

may have conflicting interests but yet may have more resources to help with assuming risk. So, as an ACO

considers its future beyond its non-risk life, it may consider a hospital or other partner to help bear the

burden of risk.

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Gaining experience with an ACO, regardless of what they may look like in a year or two, makes a

physician practice appealing to other payers. Commercial payers find value in groups which can

demonstrate success in quality reporting, care coordination and reducing the overall cost of care. It is also

a fast track to clinical integration allowing for continued independence and an avenue of unified strength

for independent practitioners.

The financial future of healthcare is in value-based reimbursement. Survival of a medical practice,

whether independent or not, will require changing to this mode of operation. Being a participant in an ACO,

particularly a non-risk based ACO, can serve as a stepping stone to the future and a may be a viable one for

physicians intent on remaining independent.

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APPENDIX A

Abbreviations

ACI – Advancing Care Information

ACO – Accountable Care Organization

AKS – Anti-Kickback Statute

APM – Advanced Payment Model

APM – Alternative Payment Model

AWV – Annual Wellness Visit

CAH – Critical Access Hospital

CAHPS – Consumer Assessment of Healthcare Providers and Systems

CCLF – CMS Claims Line Feed

CCM – Chronic Care Management

CMS – Centers for Medicare and Medicaid Services

CPIA – Clinical Practice Improvement Activity

EC – Eligible Clinician

EHR - Electronic Health Record

FFS – Fee for Service

FTC – Federal Trade Commission

GPRO – Group Practice Reporting Option

HHS – Health and Human Services

IHI – Institute for Healthcare Improvement

IPA – Independent Practice Association

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MACRA – Medicare Access and Chip Reauthorization Act

MedPAC – Medicare Payment Advisory Commission

MIPS – Merit-based Incentive Payment System

MSR – Minimum Savings Rate

MSSP – Medicare Shared Savings Plan

OIG – Office of Inspector General

PHO – Physician Hospital Organization

PPACA – Patient Protection and Affordable Care Act

SNF – Skilled Nursing Facility

TCM – Transitional Care Management

TIN – Tax Identification Number

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Appendix B

ACO Quality Measures

Table 3. 2018/2019 Reporting Year ACO Quality Measure Benchmarks  

DOMAIN   MEASURE   DESCRIPTION   FIRST AGREEMENT  PERIOD PAY‐FOR‐ PERFORMANCE PHASE‐ IN†  R=Reporting   P=Performance  

30TH 

PERC.  40TH 

PERC.  50TH 

PERC.  60TH 

PERC.  70TH 

PERC.  80TH 

PERC.  90TH 

PERC.  

PY1   PY2   PY3  

Patient/Caregiver 

Experience  

ACO‐1   CAHPS: Getting Timely  

Care, Appointments, 

and Information  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Patient/Caregiver 

Experience  

ACO‐2   CAHPS: How Well Your 

Providers Communicate  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Patient/Caregiver 

Experience  

ACO‐3   CAHPS: Patients’ Rating 

of Provider  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Patient/Caregiver 

Experience  

ACO‐4   CAHPS: Access to  

Specialists  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Patient/Caregiver 

Experience  

ACO‐5   CAHPS: Health 

Promotion and 

Education  

R   P   P   54.18   55.48   56.72   57.95   59.39   60.99   63.44  

Patient/Caregiver 

Experience  

ACO‐6   CAHPS: Shared Decision 

Making  

R   P   P   54.75   55.97   57.05   58.10   59.27   60.58   62.76  

Patient/Caregiver 

Experience  

ACO‐7   CAHPS: Health  

Status/Functional Status  

R   R   R   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

Patient/Caregiver 

Experience  

ACO‐34   CAHPS: Stewardship of 

Patient Resources  

R   P   P   24.25   25.57   26.74   28.12   29.43   31.08   33.43  

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Care  

Coordination/Patient 

Safety  

ACO‐8   Risk‐Standardized,  All 

Condition Readmission  

R   R   P   15.18   15.04   14.91   14.79   14.65   14.50   14.27  

Care  

Coordination/Patient  

Safety  

ACO‐35   Skilled Nursing Facility 

30‐ 

Day All‐Cause  

Readmission Measure  

(SNFRM)  

R   R   P   19.22   18.81   18.47   18.15   17.80   17.41   16.85  

Care  

Coordination/Patient 

Safety  

ACO‐36   All‐Cause Unplanned 

Admissions  for 

Patients  with 

Diabetes  

R   R   P   60.28   55.75   52.07   48.84   45.74   42.32   37.99  

DOMAIN   MEASURE   DESCRIPTION   FIRST AGREEMENT  PERIOD PAY‐FOR‐ PERFORMANCE PHASE‐ IN†  R=Reporting   P=Performance  

30TH 

PERC.  40TH 

PERC.  50TH 

PERC.  60TH 

PERC.  70TH 

PERC.  80TH 

PERC.  90TH 

PERC.  

PY1   PY2   PY3  

Care Coordination 

Patient Safety  

ACO‐37   All‐Cause Unplanned 

Admissions for Patients 

with Heart Failure  

R   R   P   82.32   76.20   71.24   66.71   61.91   57.13   50.99  

Care  

Coordination/Patient  

Safety  

ACO‐38   All‐Cause Unplanned 

Admissions for Patients 

with Multiple Chronic 

Conditions  

R   R   P   65.99   61.21   57.25   53.51   50.00   46.16   41.39  

Care  

Coordination/Patient  

Safety  

ACO‐43   Ambulatory Sensitive  

Condition Acute 

Composite  

R   P   P   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

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(AHRQ Prevention 

Quality  

Indicator (PQI) #91)*  

Care  

Coordination/Patient 

Safety  

ACO‐11   Use of Certified EHR  

Technology˅  

R   P   P   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

Care  

Coordination/Patient 

Safety  

ACO‐12   Medication 

Reconciliation Post‐

Discharge*  

R   P   P   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

Care  

Coordination/Patient 

Safety  

ACO‐13   Falls:  Screening  for 

Future Fall Risk  

R   P   P   43.42   50.42   58.45   66.00   73.39   81.79   90.73  

Care  

Coordination/Patient 

Safety  

ACO‐44   Use  of  Imaging  Studies 

for Low Back Pain*  

R   R   R   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

Preventive Health   ACO‐14   Preventive  Care 

and  Screening: 

Influenza 

Immunization  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Preventive Health   ACO‐15   Pneumonia Vaccination 

Status for Older Adults  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Preventive Health   ACO‐16   Preventive Care and  

Screening: Body Mass  

Index (BMI) Screening 

and  

Follow Up  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

 

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DOMAIN   MEASURE   DESCRIPTION   FIRST AGREEMENT  PERIOD PAY‐FOR‐ PERFORMANCE PHASE‐ IN†  R=Reporting   P=Performance  

30TH 

PERC.  40TH 

PERC.  50TH 

PERC.  60TH 

PERC.  70TH 

PERC.  80TH 

PERC.  90TH 

PERC.  

PY1   PY2   PY3  

Preventive Health   ACO‐17   Preventive  Care  and Screening: Tobacco Use:  Screening and Cessation  

Intervention  

R   P   P   55.22   61.76   68.18   73.85   79.55   85.67   92.31  

Preventive Health   ACO‐18   Preventive Care and  

Screening: Screening for  

Clinical Depression and  

Follow‐up Plan  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Preventive Health   ACO‐19   Colorectal Cancer 

Screening  

R   R   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Preventive Health   ACO‐20   Breast Cancer Screening   R   R   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

Preventive Health   ACO‐42   Statin  Therapy  for  the 

Prevention  and 

Treatment  of 

Cardiovascular Disease  

R   R   R   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

At‐Risk Population 

Depression  

ACO‐40   Depression Remission at 

Twelve Months  

R   R   R   N/A   N/A   N/A   N/A   N/A   N/A   N/A  

At‐Risk Population 

Diabetes  

Diabetes  

Composite  

ACO‐27 &  

ACO‐41  

ACO‐27: Diabetes 

Mellitus:  

Hemoglobin A1c Poor  

Control  

ACO‐41: Diabetes: Eye  

Exam  

R   P   P   29.90   34.33   38.81   43.32   48.21   53.64   60.37  

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ACOs: A Survival Option for Independent Practices   

4  

At‐Risk Population 

Hypertension  

ACO‐28   Hypertension (HTN):  

Controlling High Blood 

Pressure  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

At‐Risk Population 

IVD  

ACO‐30   Ischemic Vascular 

Disease  

(IVD): Use of Aspirin or  

Another Antithrombotic  

R   P   P   30.00   40.00   50.00   60.00   70.00   80.00   90.00  

*Measures introduced in the 2017 PFS final rule for which the phase‐in schedule applies beginning with Performance Year (PY) 2019. 

Benchmarks for measures that phase in‐to pay‐for‐performance in 2019 will be published before the start of PY 2019.  

†ACOs in their second agreement period will be assessed using the same pay‐for‐performance phase‐in schedule as a PY3 ACO in its first 

agreement period.  

˅Measure was updated for PY 2017 to align with the Quality Payment Program and is set at pay‐for‐reporting for all ACOs for PY 2018. 

Benchmarks will be provided for PY 2019.